Can AT&T Grow Its DIRECTV NOW Customer Base in Q3 2018?

AT&T’s (T) DIRECTV NOW is a video streaming service that delivers content directly to users over the Internet as an alternative to subscribing to traditional cable or satellite services. Wall Street analysts are confident about the robust growth in the DIRECTV NOW customer base from improved services as well as bundling the company’s wireless–video services. AT&T expects to gain 320,000 DIRECTV NOW subscribers in the third quarter.

In the second quarter, AT&T added 342,000 customers to its DIRECTV NOW video streaming service, compared with 152,000 DIRECTV NOW net subscriber additions in the second quarter of 2017. This growth was driven by the growing preference for more flexible and modestly priced video streaming services over higher-priced traditional television packages. DIRECTV NOW had 1.8 million customers on June 30.

Netflix (NFLX) and Amazon’s Prime Video are AT&T’s primary competitors in the video streaming space. Netflix had gained 5.1 million net subscribers worldwide in the quarter ended June 30, and it had 130.1 million subscribers on June 30.

As these over-the-top (or OTT) services rapidly gain customers, traditional pay-TV operators are losing customers. In the second quarter, AT&T had lost 286,000 satellite TV customers.

In addition, Charter Communications (CHTR) and Comcast (CMCSA) had lost 73,000 and 136,000 residential video customers, respectively, in the second quarter.